Mercedes-Benz shares slip on lower margin forecast

Investing.com – Shares of Mercedes Benz Group AG (ETR:MBGn) inched lower on Friday as the company lowered its earnings guidance for the year. 

The company adjusted its full-year car margin guidance to 10-11% from a previous range of 10-12%. While consensus estimates were already closer to the lower end of the range, “we would not be surprised if shares trade lower,” said analysts from RBC Capital Markets in a note. 

The analysts flagged concerns over the potential impact of high dealer inventory levels, particularly in the US, on pricing. This could lead to downward pressure on margins, especially in the second half of 2024 and potentially into 2025.

Despite achieving Group Earnings Before Interest and Taxes (EBIT) of €4.0 billion, a decrease from the prior year's €5.0 billion, the company maintained double-digit profit margins in a challenging market.

The luxury automaker saw an uptick in Mercedes-Benz (OTC:MBGAF) Cars earnings, with EBIT margins recovering to 10.2%. However, this figure fell short of Citi Research's estimates and landed at the lower end of the full-year guidance range. The company attributed the shortfall to weaker volume and mix, as well as other factors. 

On the positive side, Mercedes-Benz Vans delivered a strong performance with a 17.5% return on sales, benefiting from lower material costs. However, the Mobility division underperformed due to higher credit risk costs and negative volume and margin effects, Citi added. 

Key risks identified by Citi include Mercedes failing to comply with global ESG regulations, a sharper cyclical decline in volumes, supply recovery pressure on prices and mix, and margin pressure from selling more BEVs.